Chapter 14 Marketing Channels and Retailing 2014

Lamb, Hair, McDaniel

Chapter 13

Marketing Channels and

Retailing

2013-2014

Explain what marketing channels and channel intermediaries are describe their functions and activities

Describe common channel and strategies, and the

factors that influence their choice

Describe channel relationship types and roles, and their unique benefits and drawbacks

Explain the importance of the retailer within in the

channel and within the national economy

List and understand the different classifications and types of retailers, as well as their different operational models

Explain the major tasks involved in developing a retail marketing strategy

Discuss the roles of CRM and customer data in retailer decision making

Describe trends in retail and channel management

Explain what marketing channels and channel

intermediaries are, and describe their functions

and activities

Marketing Channels

Marketing Channel

a set of interdependent organizations that eases the transfer of ownership as

products move from producer to business user or consumer.

Channel Members negotiate with one another, buy and sell products,

and facilitate the change of ownership between buyer and seller in the course of moving the

product from the manufacturer into the hands of the final consumer

Marketing Channel Functions

Specialization and division of labor

Overcoming discrepancies

Providing contact efficiency

Specialization and Division of Labor

Creates greater efficiency

Provides lower production

Create time, place, form, and

exchange utility

Contact Efficiency

Retailer

Firms in the channel that sell directly to customers

Retailers simplify distribution by cutting the number of transactions required by consumers, making an

assortment of goods available in one location

Exhibit 14.1 How Marketing Channels Reduce the Number of Required Transactions

Channel Intermediaries

Merchant

Wholesaler

An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them.

Agents and

Brokers

Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

Channel Intermediaries

Merchant Wholesalers

Agents and

Brokers

Take T

itle to

Factors Suggesting Type of Wholesaling Intermediary to Use

Product characteristics

Buyer considerations

Market characteristics

Channel Functions Performed by Intermediaries

Contacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Storing

Sorting

Facilitating Functions

Transactional Functions

Logistical Functions

Describe common

channel and strategies,

and the factors that

influence their choice

Channel Structures

Exhibit 14.2 Marketing Channels for Consumer Products

Exhibit 14.3 Channels for Business and Industrial Products

Alternative Channel Arrangements

Multiple or dual distribution

Strategic channel alliances

Nontraditional channels

Factors Affecting Channel Choice

Producer Factors

Product Factors

Market Factors

Market Factors That Affect Channel Choices

Customer profiles

Consumer or Industrial

Customer

Size of market

Geographic location

Product Factors

Product Factors That Affect Channel Choices

Product Complexity

Product Standardization

Product Life Cycle

Product Delicacy

Product Price

Producer Factors

Producer Factors That Affect Channel Choices

Producer Resources

Number of Product Lines

Desire for Channel

Control

Levels of Distribution Intensity

Intensive A form of distribution aimed at

having a product available in

every outlet

Selective A form of distribution achieved

by screening dealers to eliminate

all but a few in any single area

Exclusive

A form of distribution that established one or a few dealers within a given area

Levels of Distribution Intensity

Intensive Achieve mass market selling. Convenience goods.

Selective

Exclusive

Work with selected intermediaries. Shopping and some specialty goods.

Work with single intermediary. Specialty goods and industrial equipment.

Several

Intensity Level

Objective Number of Intermediaries

Describe channel relationship types and roles, and their unique

benefits and drawbacks

Types of Channel Relationships

Benefits Hazards

Arm’s Length

Relationship

Fulfills a one time or

unique need; low

involvement/risk

Parties unable to

develop relationship;

low trust level

Cooperative

Relationship

Formal contract

without capital

investment/long-term

commitment; “happy

medium”

Some parties may

need more relationship

definition

Integrated

Relationship

Closely bonded

relationship; explicitly

defined relationships

High capital

investment; any failure

could affect every

channel member

Types of Channel Relationships

Global Channel Relationships

Global Channel Development

Channel policies differ

Gray marketing channels

Social Influences in Channels

Partnering

Conflict

Leadership

Control

Channel Power, Control, and Leadership

Channel

A channel member’s capacity to control

or influence the behavior of other channel

members

Channel

Control

A situation that occurs when one marketing

channel member intentionally affects another

member’s behavior

Channel

Leader

A member of a marketing channel that

exercises authority/power over the activities

of other members

Channel Conflict

Conflicts may occur if channel members:

Have conflicting goals

Fail to fulfill expectations of other channel members

Have ideological differences

Have different perceptions of reality

By COOPERATING, channel members can

speed up inventory replenishment, improve

customer service, and reduce the total

costs of the marketing channel.

Channel Partnering

the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage.

Explain the importance of the

retailer within in the channel

and within the national

economy

The Role of Retailing

Retailing

All the activities directly

related to the sale of goods

and services to the ultimate

consumer for personal, non-

business use.

The Role of Retailing

U.S. retailers employ nearly 15 million

people

Retailers account for 10.8 percent of U.S.

employment

Retailing accounts for 10 percent of U.S.

businesses

Retailers account for two-thirds of the

U.S. GDP

Industry is dominated by a few giant

organizations, such as Walmart 4

List and understand the different classifications

and types of retailers, as well as their different operational models

Classification of Retail Operations

Ownership

Level of Service

Product Assortment

Exhibit 14.4 Types of Stores and Their Characteristics

Assort- ment

Price Gross

Margin

Narrow

Med-Narrow

Medium

Med-Broad

Med-Narrow

Narrow

Mod-High

Moderate

Mod High

Moderate

Mod Low

Mod Lo-low

Low-very low

Low-High

Mod High

Mod Low

Low-High

Type of Retailer

Specialty Store

Supermarket

Convenience Store

Drugstore

Full-line Discounter

Specialty Discounter

Warehouse Clubs

Off-price Retailer

Restaurant

Service Level

Mod Hi-High

Low-Mod

Mod-Low

Low-High

Department Store Broad

Medium

Mod-High

Moderate

Mod High

Low Supermarket

Drugstore

Mod Hi-High

Low-Mod

Department Store

Independent Retailers

Chain Stores

Franchises

Owned by a single person or partnership and not part of a larger retail institution

Owned and operated as a group by a single organization

The right to operate a business or to sell a product

Classification of Ownership

Level of Service

Service

Product Assortment

Classification based on BREADTH and DEPTH of

product lines.

Gross Margin

The amount of money the retailer makes as

a percentage of sales after the cost of goods

sold is subtracted.

Major Types of Retail Operations

Department Stores

Specialty Stores

Supermarkets

Drugstores

Convenience Stores

Discount Stores

Restaurants 5

Types of Retail Operations

Department

A store housing several

departments under one roof.

Each department is headed by a

buyer, or department head who

selects merchandise.

Specialty

A retail store specializing in a

given type of merchandise.

Types of Retail Operations

Supermarket

Large, departmentalized, self-

service retailer. Specializes in

food. Some use scrambled

merchandising.

Drugstore

A retail store that stocks

pharmacy-related products

and services as its main draw.

Convenience

A miniature supermarket,

carrying only a limited line of

high-turnover convenience

goods. 5

Categories of Discount Stores

Full-Line Discounters

Specialty Discount Stores

Warehouse Clubs

Off-Price Retailers

Restaurants

• Straddle the line between retail and service establishments

• Sell tangible products (food, drink) but also services (food prep, food service)

• Many could be considered specialty retailers

Nonstore Retailing

Automatic Vending

Direct Retailing

Direct Marketing

Electronic Retailing

Automatic Vending

Is the use of machines to offer

goods for sale.

Vending is the most pervasive retail

business in the United States, with 11.5

MILLION vending machines selling

billions or dollars worth of goods

annually.

Direct Retailing

Door-to-Door

Office-to-Office

Home Sales Parties

Types of Direct Marketing

Catalogs and Mail Order

Direct Mail

Telemarketing

Electronic Retailing

Shop-at-Home Networks

Top E-Tailers by Sales Volume

America's Top Ten Retail Businesses

Rank Company Web Sales Volume (in billions)

1 Amazon.com Inc. $48.08

2 Staples Inc. $10.6

3 Apple Inc. $6.66

4 Walmart.com $4.9

5 Dell Inc. $4.6

6 Office Depot Inc. $4.1

7 Liberty Media (owns QVC) $3.76

8 Sears $3.6

9 Netflix Inc. $3.2

10 CDW $3.0

Beyond the Book

The Basic Forms of Franchising

Product and

Trade Name

Franchising

Dealer agrees to sell in

products provided by a

manufacturer or

wholesaler.

Business

Format

Franchising

An ongoing business

relationship between a

franchiser and a franchisee.

Top 10 Franchisors

1. Hampton Hotels

2. Subway

3. 7-Eleven

4. ServPro

5. Days Inn

6. McDonald’s

7. Denny’s

8. H&R Block

9. Pizza Hut

10. Dunkin Donuts

List the major tasks involved in developing

a retail marketing strategy

Retail Marketing Strategy

Develop a Retailing Mix

Define & Select a Target Market

Defining a Target Market

STEP 1: Segment the Market

Demographics

Geographics

Psychographics

Choosing the Retailing Mix

STEP 2: Choose the Retailing Mix

Product

Promotion

Personnel

Presentation

Exhibit 14.6 The Retailing Mix

Choosing the Retailing Mix

Product Offering

The mix of products offered to the

consumer by the retailer; also

called the product assortment or

merchandise mix.

Retail Promotion Strategy

Public Relations

Publicity

Sales Promotion

Advertising

The Proper Location

Economic growth potential

Competition

Geography

Choosing a Community

The Proper Location

Land costs

Zoning Regulations

Public Transportation

Socioeconomic characteristics

Traffic flows

Choosing a Specific

Choosing the Type of

Freestanding Store

Shopping Center

Retail Prices

Quality Image

High Price Low Price

Good Value Single Price Point

Presentation of the Retail Store

Employee type and density

Fixture type and density

Visual factors

Merchandise type and density

Personnel

Suggestion Selling

Trading Up Two Common

Selling Techniques

Channel and Retailing Decisions for Services

Prioritize customer service by focusing on four areas:

• Minimizing wait times

• Managing service capacity

• Improving service delivery

• Establishing channel-wide network coherence

The Relationship between Retailer Decision Making and Customer Data

Discuss the roles of CRM and customer data in retailer

decision making

Retailing and CRM

Retailers gain insight to who

purchases product

Build stronger relationships with

customers

CRM Database

Describe trends in retail and channel

management

New Developments in Retailing

M-commerce

Purchasing goods

through mobile

devices.

Online retailers offer greater variety of options for delivery, including one-use package delivery

boxes.

Chapter 14 Video New Balance Hubway

New Balance Hubway is a bike sharing system in the Boston area that uses automated stations to provide a bike service to people looking to go short distances. In this clip, employees discuss how the retailing model works for Hubway, and how the difference between brick and mortar and e-business models allowed them to succeed in the Boston area.

CLICK TO PLAY VIDEO

Part 4 Video

Scripps Networks Interactive

Distribution Decisions

Scripps Networks Interactive owns the content on popular networks such as Food Network, DIY, and the Cooking Channel. Deciding how to best get their content (both digital and solid products) into different locations takes some careful thought, and various decision makers discuss the process in this video clip.

CLICK TO PLAY VIDEO

Chapter 14 Marketing Channels and Retailing 2014

Marketing

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